World economy growing faster than in years, but not for long: OECD
Chief Economist urges faster re-training of workers amid drastic technological changes.
PARIS — The world economy is growing faster than it has in seven years and more and more people are working – but the high growth isn’t expected to last long, and wages remain stubbornly stagnant.
That’s according to forecasts from the Organisation for Economic Co-operation and Development (OECD), which urged governments to do more to ensure longer-term growth and better living standards across the board.
The group, which recommends policies for leading economies, predicts sustained growth in the US this year and next and a sharper-than-expected increase in the countries that use the euro currency.
For 2019, however, the OECD forecasts “a tempering of growth rather than continued strengthening.”
Chief Economist Catherine Mann urged faster re-training of workers amid drastic technological changes, extending retirement ages, investing in renewable energy and simplified tax rules to reduce risks of a new downturn.
“We’ve got wind under the wings but we’re flying low,” she said at the OECD headquarters in Paris.
The agency slightly raised its global growth forecast to 3.6% this year – the highest since the post-crisis upturn in 2010 – thanks to rising industrial production, trade and technology spending.
But that “remains modest by past standards,” the OECD said.
Globally, it forecasts 3.7% growth next year with a slight drop to 3.6% in 2019.
In the US, the OECD inched up its outlook, predicting 2.2% growth this year and 2.5% in 2018 thanks to “buoyant asset prices and strong business and consumer confidence.” It expects U.S. growth to fall back to 2.1 per cent in 2019.
The OECD cautioned that its forecasts are clouded by uncertainty over President Donald Trump’s tax policies and risks of protectionist trade moves. Trump campaigned to protect manufacturing jobs in the US and renegotiate international trade deals he sees as unfair.
The long-troubled eurozone enjoyed another boost as the OECD became the latest group to raise its forecasts for the 19-country region. Tuesday’s report foresees 2.4% growth this year and 2.1% for next year, but predicted growth will sink back below 2% in 2019.
The main trouble spot is Britain, whose economy will continue to be hobbled by uncertainty surrounding its exit from the European Union. Economic growth “will continue to weaken” and be just above 1 per cent in 2018 and 2019, it said.
Another big concern of the OECD: employment is rising across most rich economies, but people’s wages aren’t.
“It’s against intuition, it’s against basic principles of economics, and normally it should have been otherwise,” OECD chief Angel Gurria said. “Clearly growth has to be made more inclusive.”
“The ongoing digital revolution should be unlocking efficiencies and allowing workers to produce more,” he said. But “nobody will be able to produce more if they don’t have the skills to get the most out of the machine.”
The report also warned of the risks of high corporate debt in China and spiking housing prices in some U.S. cities and rising household debt.